The stockholders’ equity accounts of Concord Corporation on January 1, 2022, were as follows. Preferred Stock (7%, $100 par noncumulative, 7,000 shares authorized) $420,000 Common Stock ($4 stated value, 420,000 shares authorized) 1,400,000 Paid-in Capital in Excess of Par Value—Preferred Stock 21,000 Paid-in Capital in Excess of Stated Value—Common Stock 672,000 Retained Earnings 963,200 Treasury Stock (7,000 common shares) 56,000 During 2022, the corporation had the following transactions and events pertaining to its stockholders’ equity. Feb. 1 Issued 7,000 shares of common stock for $42,000. Mar. 20 Purchased 1,400 additional shares of common treasury stock at $7 per share. Oct. 1 Declared a 7% cash dividend on preferred stock, payable November 1. Nov. 1 Paid the dividend declared on October 1. Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2022. Dec. 31 Determined that net income for the year was $392,000. Paid the dividend declared on December 1. Prepare the stockholders’ equity section of the balance sheet at December 31, 2022. Calculate the payout ratio, earnings per share, and return on common stockholders’ equity. (Note: Use the common shares outstanding on January 1 and December 31 to determine the average shares outstanding.) (Round answers to 2 decimal places, e.g. 15.25.) Payout ratio enter payout ratio in percentages rounded to 1 decimal place % Earnings per share $enter earnings per share in dollars rounded to 2 decimal places Return on common stockholders’ equity
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The stockholders’ equity accounts of Concord Corporation on January 1, 2022, were as follows.
| $420,000 | ||
| Common Stock ($4 stated value, 420,000 shares authorized) | 1,400,000 | |
| Paid-in Capital in Excess of Par Value—Preferred Stock | 21,000 | |
| Paid-in Capital in Excess of Stated Value—Common Stock | 672,000 | |
| 963,200 | ||
| 56,000 |
During 2022, the corporation had the following transactions and events pertaining to its stockholders’ equity.
| Feb. | 1 | Issued 7,000 shares of common stock for $42,000. | |
| Mar. | 20 | Purchased 1,400 additional shares of common treasury stock at $7 per share. | |
| Oct. | 1 | Declared a 7% cash dividend on preferred stock, payable November 1. | |
| Nov. | 1 | Paid the dividend declared on October 1. | |
| Dec. | 1 | Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2022. | |
| Dec. | 31 |
Determined that net income for the year was $392,000. Paid the dividend declared on December 1. |
Prepare the stockholders’ equity section of the balance sheet at December 31, 2022.
Calculate the payout ratio, earnings per share, and return on common stockholders’ equity. (Note: Use the common shares outstanding on January 1 and December 31 to determine the average shares outstanding.) (Round answers to 2 decimal places, e.g. 15.25.)
| Payout ratio |
enter payout ratio in percentages rounded to 1 decimal place
|
% | |
| Earnings per share |
$enter earnings per share in dollars rounded to 2 decimal places
|
||
| Return on common stockholders’ equity |
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